Canada’s growing household indebtedness and rising real-estate prices are posing risks to the world’s 10th-largest economy that may require additional measures to rein in the market, the Organization for Economic Cooperation and Development said.
The Paris-based group of developed nations, in a report on Canada released today in Ottawa, said there are signs of “imbalances” in the Vancouver and Toronto real-estate markets as well as the condominium segment. The report said steps by Finance Minister Jim Flaherty to tighten mortgage insurance rules in recent years have helped.
Historically high levels of indebtedness are “making households vulnerable to a possible decline in real-estate prices,” according to the report. “Further measures may be needed, possibly targeted on certain market segments, if imbalances persist.”
Flaherty has shortened amortization rules for government- insured mortgages twice since 2008, lowering the limit to 30 years in January 2011. He’s also cut the maximum amount homeowners can borrow against the value of their homes, withdrawn government insurance on home-equity lines of credit, and introduced legislation that prevents lenders from using government-insured mortgages as collateral for debt known as covered bonds.
When will the bubble burst? CLICK HERE